India appears to be at a turning point in housing affordability, helped by lower home loan interest rates, rising incomes and government support measures that have expanded access to mortgages. But industry executives warn that without fresh policy intervention, the promise of affordable housing could stall.
Housing finance companies and real estate developers are urging the government to revive fiscal incentives in the Union Budget for 2026–27, particularly for projects aimed at economically weaker section (EWS) and low-income group (LIG) households. They argue that incentives such as tax holidays and higher development density are essential to make affordable housing financially viable.
Under the first phase of the Pradhan Mantri Awas Yojana (PMAY), developers were offered a 100% income tax exemption on profits from approved affordable housing projects. That provision expired in March 2022 and was not extended under PMAY 2.0. Developers say its withdrawal has hurt project economics.
“The tax exemption under PMAY 1.0 played a critical role in improving project viability,” said a senior industry official, who declined to be named. “Without similar incentives, it is difficult to make affordable housing work.”
Rising land prices, higher costs of cement, steel and labour, and tighter financing conditions have pushed many builders away from the affordable segment. Developers have increasingly focused on mid- and high-income housing, where margins and cash flows are more predictable.
Industry bodies are also calling for a redefinition of what qualifies as “affordable”. The Confederation of Real Estate Developers’ Associations of India (CREDAI) says the current price cap of ₹45 lakh, set in 2017, no longer reflects market realities. Its president, Shekhar Patel, has urged the government to either scrap the cap or raise it to ₹90 lakh.
Despite these challenges, housing affordability has improved in several cities. Knight Frank India’s 2025 Affordability Index shows Ahmedabad as the most affordable market, while Mumbai’s affordability ratio has fallen below 50% for the first time.
However, analysts caution that affordability remains uneven. While home sales fell in 2025, the value of transactions rose, highlighting resilient demand at the premium end of the market even as affordable housing struggles to keep pace.
